Medicare’s Future: An Examination of the Independent Payment Advisory Board

There is no question that Medicare spending must be controlled if we are to have any hope of getting overall federal spending under control. The question is who will make the decisions. There is a wide diversity of opinion and legitimate concern about the new Independent Payment Advisory Board (IPAB) and the powers given in PPACA to its 15 unelected officials who are charged with containing Medicare spending.

In my testimony, I provide an overview of how the IPAB will work, the controversy surrounding the board’s powers, and an overview of some of the ideas being discussed as alternative solutions, including widening the baseline for the spending cuts, requiring an evaluation of the overall impact of the payment reductions, and limiting and redirecting IPAB’s powers. I conclude that there is a better way: We have a working model in the Medicare Part D program, in which private companies offer prescription drug benefits to seniors and compete on benefit design and price, and which is coming in significantly below projected costs.

While the IPAB has unprecedented power, allocation of the tools available to the board reveals a fundamental conflict in American health policy: It simultaneously is given broad authority over Medicare payment policy, but its hands are tied in what it can do to reach the mandatory budgetary targets.

The president wants to double-down on IPAB’s powers, giving the board authority to cut payments to doctors even more deeply than called for in the PPACA and giving it the power to “sequester” congressional appropriations.

The Constitution gives the power of the purse to Congress so that elected representatives can be accountable to the voters for their decisions. The IPAB would turn this principle upside down. The IPAB is at the center of the conflict between two world views. Do we entrust individuals with the decisions for their own care? Or do we entrust those decisions to a government-appointed panel of experts in Washington who will have authority over hundreds of billions of dollars in Medicare spending?